In pursuit of ideological excellence

Written by Surjit S Bhalla | Updated: Aug 18 2013, 11:27am hrs
In An Uncertain Glory, two leading academics buttress their allegations and recommendations about economic growth in India but fall short of several simple facts that do not live up to their ideologies

Trying to prove that your conclusions should be more drastic

Bob Dylan, Queen Jane

Approximately

In their book, An Uncertain Glory, Amartya Sen and Jean Dreze repeat what they have stated in previous books and articles. The basic message they want to get across is simply stated as follows: India has a fantastic economic growth record over the last 30 years, and especially the last decade. Second only to China, as we are informed, endlessly. But this growth record has not been accompanied by a commensurate improvement in the living standards of the poor. Indeed, as the authors repeat, in chapter after chapter, that Indias record on the social indicators is either worse than sub-Saharan Africa, or among the worst in south Asia. Hence, no matter what comparator countries are chosen, Indias social indicator performance is just unacceptable. And given the fantastic record on growth, the non-record on living standards is unethical and possibly immoral. Their solution to this tragedymore government expenditures on health, education, employment, etc, and especially expenditures pioneered by Sen-Dreze and obligingly implemented by the National Advisory Council (NAC) led by Sonia Gandhi.

The authors are academics and so they buttress their allegations, and recommendations, in a 434-page book, containing 45 pages each of bibliography and statistical appendix. At the end of the book, one is impressed with the wide range of evidence accumulated and presented. With such antecedents, and such reputation, one would have thought that the authors recommendations are a no-brainer, so why hasnt every country, and why isnt every country, listening to their scholarly advice If they are listening, then why the book If they arent listening, why not

The authors can be faulted on many counts, but mainly three. First, the evidence presented is selective. Second, most of the evidence presented suffers from a major conceptual flaw of confusing levels with changes. Third, the solution offeredspend more money on the same tired and failed poverty alleviation programmesis frankly old-age and outdated. Such programmes might have been appropriate (unlikely but might) 50 years ago when Indias per capita income was $100 per year, but hugely corrupt when practised in an economy whose average per capita income (in current dollar terms) is at least 15 times richer.

But first a minor, and surprising, error in the book. The authors are zealous about making their point, and predictably, such zealousness gets in their way. On page 40, they state: And there is also the continuing scandal of a quarter of the population (including nearly half the women) remaining effectively illiterate in a country with such high-tech achievements in education (emphasis added). But half the women are a quarter of the population and if half the women are illiterate, then that implies that all the men are literate, something no one, especially the authors, accuse India ofand something that is far from true!

Two unfortunate realities for the authors, realities which damage immensely the philosophically economic content of their findings. First, reading about Indias fastest growth at a time when the Indian economy is facing the second consecutive lowest growth in two decades is bothersome. Second, the government of India has just released data on the mother of all social indicatorsthe head count ratio of poverty aka the percentage of poor in the populationfor 2011-12. Absolute poverty is considered by most scholars and policy makers to be the benchmark for living standards. The last years poverty data that the authors use is 2009-10. That was a bad drought year and most experts would not want to base their trend analysis on an outlier year which is where the authors commit their cardinal mistake.

On page 190, the authors state What is really startling is not so much that the official poverty line is so low, but that even with this low benchmark so many people are below ita full 30% of the population in 2009-10 (original italics). Indias poverty line is the international poverty line chosen by the UN and the World Bank for the last 25 years. Indeed, the Indian poverty line is the reference line for the rest of the developing world, so it is a meaningless assertion to state that it is too low. The authors must be aware of the equivalence between the Indian and World Bank poverty line, but not unlike many other facts, the authors are quite happy to commit gross errors of omission. But if this helps in expanding programmes for the poor

The new data for just two years later than 2011-12, reports poverty in India at 22%still a lot of poverty to reduce, but Indias poverty reduction record is among the best in the world. Further, on a growth vs poverty reduction basis, growth in India yields three times faster poverty reduction than the authors favourite comparator country, China. One can object to slow growth in India, but given this growth, what India has done with it is extremely remarkable.

There are some errors of fact on this important indicator. The authors state (p190) that the poverty line is regularly updated for price increases, but not for the enhanced requirements of dignified living (emphasis added). The error is in the authors not recognising that the poverty line includes any and all expenditures the poor choose to make, that is, it includes expenditures on health, education, paan, bidi, tobacco and intoxicants. Indeed, in 2011-12, about 8% of the expenditures of the poor were on education and health and part of the poverty line cut-off.

But these simple facts do not fit in well with the ideology of the authors who havent met a government expenditure they did not like or did not want to expand. They have just one solution to all problemsspend more in the name of the poor money, and never mind that more than 80% of this money does not reach the targeted poor, because 20% does! In an op-ed for The Times of India, July 1, 2005, one of the authors of this book, Jean Dreze, wrote that corruption was rampant in government employment programmes which preceded NREGA. So what was/is Dreze-Sen conclusion on what to do about this corruptionWhy, just expand the programme and go national! Perhaps not so surprisingly, this article is not referenced among the 600-odd references cited by the authors including 26 of Dreze alone.

And how has NREGA performed in reaching the poor On page 202 they state NREGA workers, for their part, belong mainly to deprived sections of the rural population. This quote is referenced with a footnote which contains seven references, and the casual observer is easily convinced that what the authors state must be true. One of the studies quoted is a 2012 World Bank authored study, Dutta et al: Does Indias Employment Guarantee Scheme Guarantee Employment, Economic and Political Weekly, April 21. On page 26 of this study, the authors present a table in which it is shown that 18% of the richest two quintiles benefitted from NREGA wages for back-breaking work. The average participation rate for the entire rural population24%!

It is fair to end this review by commenting on what Sen-Dreze say that I feel is correct. Fuel subsidies should be ended. Correct. The Indian government should have spent more on primary and secondary education, especially in the first 40 years post independence. Correct. That India has been biased against women. Correct. All those who find this as new, or radical, or unknown, please raise your hand.

Surjit S Bhalla is chairman of Oxus Investments, an emerging market advisory firm, and a senior advisor to Blufin, a leading financial information company. He can be followed on Twitter, @surjitbhalla